Verizon to Save on Duplicative Functions After Alltel Deal

by Jamie Walden  on Friday, Jun. 6, 2008 4:33 pm  

In a conference call Thursday, members of Verizon management talked about details of - and the reasoning behind - the Alltel buyout.

Ivan Seidenberg, chairman and CEO of Verizon Communications Inc., said he initiated the merger by approaching the private equity firms.

"I approached the equity partners sometime in April, both TPG [Capital] and Goldman [Sachs Capital Partners] as well as one of the key banks, to discuss whether or not they would have an appetite to consider a transaction that would be different than the one that they finished last year because market conditions are different," Seidenberg said.

"We had a couple of preliminary discussions, framed out an approach and, about two weeks ago, we started in earnest trying to put together a transaction that was a win-win for all the parties," he added.

Doreen Toben, executive vice president and chief financial officer of Verizon Communications, anticipates Verizon pursuing "synergy-savings" tactics that will save $9 billion within 3 years.

"The key areas of saving opportunities include: less advertising, reduced roaming, lower network operating expenses and headcount," Toben said.

"We anticipate eliminating duplication -- duplicate systems, facilities and platforms," said Verizon Wireless CFO John Townsend.

Townsend said Verizon's "opportunity" to realize some cost savings by removing duplicative functions such as "customer service, sales and marketing functions."

But while Verizon expects to lop off duplicative infrastructure, Alltel employees seem to have served as a significant catalyst for Verizon to go through with the deal.

Lowell McAdam, president and CEO of Verizon Wireless, said Alltel has "a performance-based culture very much aligned with Verizon Wireless and there's an outstanding group of employees there so we're very excited about bringing this asset into the Verizon Wireless operation."

McAdam said Verizon has had its "eye on Alltel for quite a long time" for several reasons. He highlighted Alltel's strength of service in the center of the country, where Verizon's service is a bit lacking.

"The combination will provide unmatched and unprecedented coverage and performance and network capability to our customers," McAdam said.

Customers having to rely less on roaming will be mutually beneficial as a convenience and cost-saver to both customers and Verizon.

To listen to the conference call, click here.


Click for's complete coverage of the Alltel-Verizon deal.



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